Watson Inc: Being A Landlord By Default: Eliminate Consumer Debt ...
Why the Increase in Reluctant Landlords
Homeowners who have relocated due to new jobs but can't sell their homes or those who want their home values to return before they sell are becoming landlords to offset their mortgages and other expenses. Allstate, the U.S. second largest home insurer, reported that there is a 27% increase in homeowners who converted their homeowners insurance to landlord policies compared to the same quarter last year. In many cases, these homeowners are just looking for some relief from their mortgages and related expenses.
, and the increased responsibility for bookkeeping. Renting out a property is functionally similar to running a small business, yet reluctant landlords are often lacking and unwilling to learn the necessary tools required to do it effectively. After all, being a landlord is just a "temporary fix" for many. One way to make sure that the property is managed correctly is to hire professional property managers, which typically costs 3 to 12% of rental income. Unfortunately, this often erodes any potential profits, but for these default landlords making profits is not their primary motive anyway.Leasing the Property to Tenants May Not Solve Problem
Becoming a landlord by default is definitely not a panaceas. Even with rental income, these new landlords may still find themselves in negative cash flow positions after you factor in the mortgage, insurance, taxes, and other related expenses. In some U.S. markets, the demand for rental units isn't that strong. Note that the vacancy rate for rental units is the highest in two decades and rents are falling, which is good news for good tenants and bad news for landlords. Additionally, renting out the house may only be delaying the inevitable loss of a property. This is particularly true in cases where the owners owe substantially more on their homes than they are worth. These buyers...